In the final quarter of 2023, Tesla reported record-breaking global sales of 484,507 electric vehicles (EVs), marking a nearly 20% increase from the same period in 2022. Despite this achievement, Chinese automaker BYD surpassed Tesla with 526,409 EVs sold during the same quarter, becoming the world's largest EV manufacturer. However, Tesla maintained its lead in total full-year sales, delivering 1.8 million EVs compared to BYD's 1.57 million EVs and 1.44 million hybrids.
BYD's rapid growth, backed by Warren Buffett, highlights China's ascendance in the EV industry. China's government support, including a target for at least 20% of new annual car sales to be new energy vehicles (NEVs) by 2025, has propelled the country's EV sector. This target was achieved in 2022, three years ahead of schedule, with NEVs constituting over 30% of total car sales in the first 11 months of 2023.
The Chinese government's aggressive support and infrastructure investments have positioned the country as a leader in the global EV industry. Analysts attribute China's dominance to its market scale, supply chain control, and cost advantages. Government subsidies and infrastructure investments have facilitated the expansion of Chinese EV manufacturers like BYD, both domestically and internationally.
Despite the success, a price war and intense competition have impacted profit margins within the industry. As China's economy slowed, a demand slowdown was a concern for automakers. In response, Tesla initiated a price cut in China in January, triggering a broader price war as other automakers followed suit to remain competitive. While the price war boosted sales, it threatened the overall profitability of the industry.
The Chinese car industry's profit margin for the first 11 months of the previous year was just 5%, down from 5.7% in 2022 and 6.1% in 2021. To counteract the domestic market slowdown, Chinese car manufacturers have been expanding globally, particularly in Europe, Australia, and Southeast Asia. BYD's recent announcement of building an EV factory in Hungary reflects this global expansion strategy.
In conclusion, BYD's surge in quarterly sales and its overtaking of Tesla underscores China's dominant position in the global EV market. Despite intense competition, China's government support, market scale, and strategic advantages have propelled its EV industry to the forefront. The global EV landscape continues to evolve, with Chinese manufacturers actively seeking international expansion amid challenges such as a price war and declining profit margins.